Tracking the market and economic trends that shape your finances.

Buyers return to bond market, pushing yields lower after recent surge

After soaring in recent days, Treasury bond yields were trading flat to lower Thursday after the government’s sale of $13 billion in 30-year bonds attracted strong demand from investors.

The bonds were sold at a yield of 4.41%, well below the 4.48% expected by bond dealers surveyed by Bloomberg News.

“Demand was excessive,” said Tom DiGaloma, a bond trader at Guggenheim Securities in New York.

Foreign buyers in particular were hungry for the bonds: So-called indirect bidders, a category that includes foreign investors, bought 49% of the offering, the most for any 30-year bond deal since July 2009, according to CRT Capital Group.

Foreigners’ interest is important because it suggests that, despite expectations that the federal budget deficit will remain massive -- thanks to the expected extension of the 2001 and 2003 tax cuts -- America’s foreign creditors aren’t shying away from funding Uncle Sam.

The yield on the previously issued 30-year bond (charted at left) fell to 4.37% by about 11 a.m. PST from a six-month high of 4.44% on Wednesday.

The 10-year T-note yield, a benchmark for mortgage rates, eased to 3.20% from 3.23% on Wednesday. But the jump from 2.99% a week ago already has pulled up home loan rates to their highest levels since June.

Market yields on Treasuries, municipal bonds and many other fixed-income securities have risen sharply over the last month, in part on optimism about the economic outlook.

President Obama’s deal with Republican leaders to extend the 2001 and 2003 tax cuts fueled another jump in yields this week, on better prospects for growth in 2011 and on expectations for continued heavy federal borrowing to finance the deficit.